Wednesday, March 8, 2023

Why Loan Principal Matters

The reason this is important is because when we get closer to seeing the light at the end of the tunnel here in the BlockFi bankrupcy, BlockFi-Kroll will propose their resolution to this mess. The way it works in these cases with debtors in possession of collateral and other loan products, is that the Debtor typically offers its Creditors options for treatment.

If this is your first bankruptcy (as a creditor) or you haven't been following what's happening with Celsius Network - the other major crypto lender in the market that went bankrupt months before BlockFi - now's a really good time to catch up! This is how they have proposed to treat their collateralized loan customers.

Celsius Settlement Proposal, Pg. 19, Docket 2066, 2/15/2023

Considering: the results of the recent "LTV Survey" here in our sub, and; that BlockFi has retained the same legal counsel as Celsius Network (Kirkland & Ellis) and that Celsius creditors are being represented by the same counselors as the BlockFi creditors, and; the striking sequential failure of competing lending giants in the crypto industry, within a short proximity of time, following the same chain of events, involving the same maleficent players (or character types), negatively impacting the same retail market, etc., it's fair to conclude that whatever works for Celsius borrowers may serve as a beginning framework for BlockFi borrowers.

So how would you be treated in this proposal if Celsius was your debtor? "A" or "B?"

Here's your homework for all of you DD readers (no, not "Dungeons and Dragons" - bloody hell!):

Celsius Network LLC, et al. (stretto.com) search for docket number 2066 filed on 15 February 2023.

Statement / Debtors' Statement with Respect to the Status of the Debtors' Chapter 11 Plan Process filed by Joshua Sussberg on behalf of Celsius Network LLC. (Sussberg, Joshua)

https://cases.stretto.com/public/x191/11749/PLEADINGS/1174902152380000000043.pdf

Just after midnight - that is, before "last call" for all you night-moves lovers celebrating Valentine's Day - Celsius entered this settlement proposal into the court docket, and before many of us got to work that morning, the UCC had declared victory.

"Last night Celsius (with UCC support) selected NovaWulf to sponsor a reorganization plan that will distribute liquid crypto to all account holders, as well as create a litigation trust and provide creditors with common equity in a NewCo holding illiquid assets like mining."

- Celsius Official Committee of Unsecured Creditors (@CelsiusUcc) / Twitter (15 Feb 2023)

In the Celsius hearings, it seems that retail loan customers were able to make some noise.

Celsius selected NovaWulf's bid out of more than 130 proposals received, saying that NovaWulf was the only finalist that intended to maintain long-term control over Celsius' harder-to-liquidate assets, like its loan portfolio...

- 15 Feb 2023, Celsius Network chooses NovaWulf bid for bankruptcy exit | Reuters

Specifically, after, "set off against existing loan collateral" is taken, any excess collateral will receive either Treatment A or Treatment B based on the $5k threshold.

Under the plan, Celsius customers with less than $5,000 in their accounts will be eligible to receive a one-time payment in bitcoin, Etherium [sic] or the stablecoin USDC...that option will be available to more than 85% of its customers, providing them with about 70% of the value of their deposits (Reuters, 15 Feb 23).

With Celsius Network retail borrowers making progress, among the other dominoes that have fallen since last year, including BlockFi: 3AC, Voyager, FTX and now Genesis,

The proposed plan could potentially serve as a guide for other companies if it’s put into place, as Celsius is not the only crypto lender that’s faced trouble since digital asset prices began to skid last year.

- 15 Feb 2023, Celsius Reaches Acquisition Agreement with NovaWulf (yahoo.com)

We've made a great start retaining legal counsel, advocating for the interests of BlockFi retail loan holders, but now we need to get ahead of the curve and be ready for what BFi-Kroll will try to propose and what the UCC will try to force us into something convenient for them. We need to be armed with data and know where we all stand in the framework of the Celsius proposal. Then from here, we can say, "That'll work for Celsius borrowers, but we have our own ideas of what is fair for us, and we will raise hell if we have to."

The Celsius and BFi cases are different and we don't have to accept only two treatment options. If we collect the right data with these surveys, we can demand attention be paid to those of us with varying ranges of "thresholds" who should be acknowledged and treated with respect to the crypto capital we are owed. Maybe we advocate for a Treatment C, D, and even an E if there is enough holding value at stake and stubborn will power as well.

Are you the 85% that gets 70% return or are you the 15% that gets 30% return? Do you want to take your Federal Reserve Notes and jet? Do you want tokenized, owner equity in a new, restructured company? Are you willing to wait to get all your crypto back? Even though BFi may have already sold all of our crypto, are you willing to unyieldingly demand BFi go back and purchase crypto and return it to you under some negotiated terms?

Please remember, that our advocacy for the return of our property will only be as effective as we are a group united, represented by legal counsel who is empowered to move on our behalf. So if you haven't chipped in something to help the cause continue making progress here, please seriously consider doing so today https://gofund.me/d14e1b03 - it is vital.

Join us for live discussion and support on our new Discord https://discord.gg/se5TR66SWy. Email our ad hoc committee [blockfi.lending.advocates@gmail.com](mailto:blockfi.lending.advocates@gmail.com) and learn about what we're working on, the progress we're making, and how you can play an active role in what we're doing.


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